Critical Survey: Woodward (WWD) vs. Timken Company (The) (TKR)

Woodward (NASDAQ: WWD) and Timken Company (The) (NYSE:TKR) are both mid-cap computer and technology companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, analyst recommendations, valuation, institutional ownership, dividends, earnings and risk.

Volatility and Risk

Woodward has a beta of 1.21, indicating that its stock price is 21% more volatile than the S&P 500. Comparatively, Timken Company (The) has a beta of 1.37, indicating that its stock price is 37% more volatile than the S&P 500.

Dividends

Woodward pays an annual dividend of $0.50 per share and has a dividend yield of 0.6%. Timken Company (The) pays an annual dividend of $1.08 per share and has a dividend yield of 2.2%. Woodward pays out 15.8% of its earnings in the form of a dividend. Timken Company (The) pays out 51.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Timken Company (The) has raised its dividend for 3 consecutive years. Timken Company (The) is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and target prices for Woodward and Timken Company (The), as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Woodward 0 3 5 0 2.63
Timken Company (The) 0 3 2 0 2.40

Woodward currently has a consensus price target of $74.75, indicating a potential downside of 3.69%. Timken Company (The) has a consensus price target of $45.20, indicating a potential downside of 6.90%. Given Woodward’s stronger consensus rating and higher possible upside, research analysts clearly believe Woodward is more favorable than Timken Company (The).

Profitability

This table compares Woodward and Timken Company (The)’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Woodward 9.67% 16.12% 7.67%
Timken Company (The) 5.98% 12.73% 5.96%

Institutional & Insider Ownership

71.2% of Woodward shares are held by institutional investors. Comparatively, 79.6% of Timken Company (The) shares are held by institutional investors. 5.9% of Woodward shares are held by company insiders. Comparatively, 11.1% of Timken Company (The) shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Woodward and Timken Company (The)’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Woodward $2.08 billion 2.29 $342.57 million $3.17 24.48
Timken Company (The) $2.77 billion 1.36 $385.30 million $2.09 23.23

Timken Company (The) has higher revenue and earnings than Woodward. Timken Company (The) is trading at a lower price-to-earnings ratio than Woodward, indicating that it is currently the more affordable of the two stocks.

Summary

Woodward beats Timken Company (The) on 10 of the 17 factors compared between the two stocks.

About Woodward

Woodward, Inc. is an independent designer, manufacturer and service provider of energy control and optimization solutions. The Company designs, produces and services energy control products for various applications. The Company’s segments include Aerospace and Industrial. The Company’s Aerospace segment designs, manufactures and services systems and products for the management of fuel, air, combustion and motion control. The Company’s Industrial segment designs, produces and services systems and products for the management of fuel, air, fluids, gases, electricity, motion and combustion. The Company has production and assembly facilities in the United States, Europe and Asia and South America, and promotes its products and services throughout the world. The Company offers solutions for the aerospace, industrial and energy markets. The Company focuses primarily on serving original equipment manufacturers (OEMs) and equipment packagers.

About Timken Company (The)

The Timken Company engineers, manufactures and markets bearings, transmissions, gearboxes, belts, chain, couplings and related products and offers a spectrum of power system rebuild and repair services across the world. The Company operates through two segments: Mobile Industries and Process Industries. Its Mobile Industries segment offers a portfolio of bearings, seals, lubrication devices and systems, as well as power transmission components, engineered chain, augers, belts and related products and maintenance services to original equipment manufacturers (OEMs) and end users of off-highway equipment for the agricultural, construction, mining, outdoor power equipment and powersports markets; on-highway vehicles, including passenger cars, light trucks and medium- and heavy-duty trucks; rail cars, and locomotives. Its Process Industries segment supplies industrial bearings and assemblies, power transmission components, and related products and services to OEMs and end users.

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